Deutsche Bank London Conference June 2004 Tom Boardman Chief executive

Road map

Strategic recovery programme

• Restore the bank • Build for the future

Organic initiatives

e.g. Retail mass market strategy, Corporate transactional banking

initiatives

Priorities & Group strategy

• Chairman’s 10 key issues • CEO’s objectives • Nedcor Board objectives

Five point plan • Reconstitute EXCO • Strategic review • Improve transparency • Deliver on merger • Customer service focus

Margin too low, need to build NIR, business not cost efficient & too many non-interest earning assets

all contributing to poor return on equity

Provisions / Lending assets

0.6% 0.8%

NII / Lending assets 3.5% 3.9%

NIR / NII 112% 110%

Lending assets / Total assets

90.7% 87.9%

ROE 24.0% 24.6%

Operating expenses / Lending assets Operating expenses / Total income

4.2%

56.2%

4.6%

57.1%

Competitor B

Nedcor

Peer group comparison

Ratios (Excluding Forex) A Including M&R

expenses Excluding M&R

expenses

0.9%

3.0%

117%

79.2%

10.3%

4.5%

70.1%

0.9%

3.0%

117%

79.2%

13.0%

4.3%

67.4%

Strategic recovery programme

Restore the bank Build for the future

• Long term strategic plan

• Customer satisfaction / retention

• Improve bank image

• Grow transactional banking

• Financial Sector Charter

• Bancassurance

• Management information • Restore & manage capital • Merger completion • Peoples Bank integration • Risk management & governance • Refocus incentive plans • Staff morale, culture & values • Effective executive team (EXCO) • Reduce cost base • Non-core asset disposal

Clearly tracking all initiatives

• Organic

• M&R

• Recovery benefits

• Recovery costs

Strategic recovery programme

0

50

100

150

200

250

300

350

R'0

00

Jan

Feb

Mar Apr

May

June July

Aug

Sep

Oct

Nov Dec

Months

Budget excl Initiatives Initiatives Actuals

Division example - 2004 monthly budget (headline earnings)

0 50 100 150 200 250 300

Total: 14 May Total: 30 Apr

Hard: 14 May Hard: 30 Apr

Medium: 14 May Medium: 30 Apr

Soft: 14 May Soft: 30 Apr

Under debate: 14 May Under debate: 30 Apr

Strategic recovery programme

Divisional example - status of net benefits

Management information

• Baseline set & clean-up completed • Stable & accurate financial data • “One version of the truth”

◦ Cost transfer pricing ◦ Capital allocation ◦ Funds transfer pricing

• Asset and liability management • Financial processing architecture • Regulatory (DI) returns • Board / management pack redesign • ROE & RaRoC analysis

• Improved MIS • Focus

accountability • Clear

measurement

By Dec 2004

Restore & manage capital

• R5.2 billion rights issue

• Sale of non-core assets & businesses

• Management of foreign capital

• Balance sheet efficiency

Target Tier 1 capital 7.5%

By Dec 2004

Merger completion

• BoE Business Bank ◦ All clients migrated ◦ Completion end June 2004

• Migration strategy for NBS ◦ 64k high net worth clients to be transferred to Nedbank ◦ Balance to be transferred to Peoples Bank ◦ Completion end November 2004

Overall committed synergy target remains R700m p.a. & merger costs within budget

Peoples Bank integration

• Minorities agreed to merger

• Management integrated into Nedbank Retail

• Risk centralised

• Branch integration completion by mid 2005

Integrated retail offering in Nedbank

Risk management & governance

• Re-examine governance structures

• Basel II implementation

• FICA compliance (money laundering)

• FAIS compliance (financial intermediaries)

• Revised ALM & ALCO process

Enhanced risk management

Refocus incentive plans

Guaranteed package Short term incentives

• Principles supporting schemes agreed

• Pool for 2004 agreed, linked to business results

• Median pay for median performance

• Focus for 2004 - financial performance

• Modifiers to measure other deliverables

Long term incentives

• Performance-based share option scheme

Percentage of S-T incentive tied to Group results: Exco: 80% NG7: 60% NG6: 50% NG5: 40% NG4 & below: 30%

Staff morale, culture & values • Required leadership

• Accountability

• Staff communication

• Strategy, vision & values

• Staff consultation

• Continuous feedback

Executive team

Group Business Innovation

Nedcor Group CEO Tom Boardman

Group Operations

Group Finance

Retail & Wealth Management

Group Strategy & Corporate

Affairs

Nedbank Capital Nedbank Corporate

Barry Hore

Len de Villiers

Bob Head (acting)

Pete Backwell

Rob Shuter

Brian Kennedy Graham Dempster

Group Risk CEO’s Office / FSC / HR

Philip Wessels - Derek Muller - Nolitha Fakude - Ivan Mzimela

Cost focus: retrenchment process

• Staff costs = 49% of total expenses

• Voluntary retrenchment: March 2004

• 1 458 voluntary retrenchments

• Target to finalise retrenchments by end July 2004

• Rebuild motivation & morale of staff

Reduced costs for future (but one-off retrenchment costs in 2004)

Analysis of cost reduction targets with interim results

0

100

200

300

400

500

600

700

800

Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05

African Coloured Indian White

Voluntary retrenchments

Total 1 458

Expected last day

Non-core asset disposal

Disposal of non-core subsidiaries • Chiswell sold £20.9m • Stenham sold £19m • BoE Life Intl - £22m capital taken out & remaining business being sold

Disposal of non-core assets From 31 Dec 03, approximately R2bn to be disposed of (over next 2-3 years) • Century City sold R98m • 75 Grayston Rd sold R20m • Aplitec reducing to 17% holding • “Toys” value R19.7m – being marketed • Endowments: awaiting tax certainty to enable realisation.

Strategic direction

Back to basics –

banking

Southern Africa focus

Maintain mix of Retail, Corporate & Capital

Move to being truly

client-centric

Transformation

• Disposal - non-core assets

• Simplify brand strategy

• Optimise asset & liability management

• Exploit bancassurance

• Effective MIS

• Improve staff morale

Back to basics • Restructure foreign operations

• Cautious African expansion

Southern Africa focus

Long-term strategic direction

• Focus on growing Retail • Growing transactional banking

• Build on strengths in Corporate

Retail, Corporate & Capital

• Financial Sector Charter

• Continued focus on the community / environment

Transformation

• Client-centric processes & products

• Train & empower front-line

Client centricity

Bank A Bank B Bank C Nedcor

Grow customer base

Number of Retail customers

19% 18%21%

24%

18%

0%

5%

10%

15%

20%

25%

30%

Bank A Bank B Bank C Nedcor Other

18%20%

18%

25%

19%

0%

5%

10%

15%

20%

25%

30%

Bank A Bank B Bank C Nedcor Other

Total deposits market share Total loans & overdrafts market share

% primary customers

• Too few primary banker customers

- Both Retail and Corporate banking

• Imperative to grow share of transactional banking

(Domestic market shares – Nedcor analysis)

Customer satisfaction / retention

• Customer research

• Measurement of defection

• Understand causes of dissatisfaction

• Review processes & system functionality

• Implement training

• Align rewards with customer service

• “Staying close to customers” initiatives

Financial Sector Charter

Major milestones completed:

• BEE policy committee to monitor compliance

• Allocating responsibility to the respective BU’s

Major milestones for remainder 2004

• BEE ownership strategy

• Finalise procurement, EE & empowerment financing strategies & targets (group wide FSC & BU specific strategies)

• Internal transformation communication & education

Bancassurance

• Sharing platforms

• Differentiated tactics

◦ Retail banking

◦ Corporate banking

◦ Commercial banking

• Insurance & assurance products for bank customers

◦ Short-term insurance & long term assurance

• Appropriate execution capability

◦ Skilled sales force

◦ Infrastructure

Organic growth initiatives

• Grow transaction revenue – primary banker status

• Focus on improving cross-sell ratio

• Implement mass market retail strategy

◦ Target youth & middle income South Africa

◦ Differentiated product offering

• Proactively offer creative solutions to corporate market

• Prevent revenue leakage (i.e. price discounting)

• Rationalise operational / back-office duplication

(i.e. within clusters)

Some small wins

• E&Y M&A survey ◦ Top domestic merchant bank & sponsor by deal flow ◦ 2nd domestic merchant bank by deal value

• Financial Mail’s Ranking the Analysts survey ◦ Ranked 2nd for equity sectors ◦ Overall ranked 4th (top domestic house)

• Financial Mail’s Top Empowerment Companies ◦ Ranked 13th of 200 companies (next bank 42nd)

• Offshore & Product Awards – London ◦ Best Offshore Bank (3rd consecutive year) ◦ Best Offshore Product (4th consecutive year) ◦ Best Offshore Banking Product Range

Current position

• Full support of parent - Old Mutual • Grown to one of the largest SA banks • Dynamic young EXCO team • Successfully raised enough capital to grow • Reduced forex risk • Reduced interest rate risk

◦ Expensive fixed rate debt rolled off - April 2004 ◦ Improved hedging policies

• Faced difficult & hard facts - have been transparent • Largely concluded retrenchments • Launched a number of initiatives for recovery programme

“There is no miracle moment. Small incremental wins in one common direction will restore Nedcor to a highly rated & respected financial institution.”

Thank you